House budget targets: Spending cuts, tax increases, and the old shift play

From the moment House Speaker Margaret Anderson Kelliher (DFL-Minneapolis) (pictured) and Majority Leader Tony Sertich (DFL-Chisholm) showed up at yesterday’s House budget press conference with more than a dozen tots and teens surrounding them, it was pretty clear that the kids weren’t there to deliver an a capella rendition of "We Are the World"–and, more to the point, that House DFLers would not be following the Senate DFL’s lead in proposing cuts to education.

That’s no surprise; many observers expect the tussle between House and Senate DFLers over the relative priority accorded to education and health care to be nearly as difficult as the battle between the DFL-controlled Legislature and Gov. Tim Pawlenty.

Pronouncing Pawlenty’s recently revised budget "balanced for the next election, not the next generation," Kelliher rolled out a set of top-line targets that propose to solve Minnesota’s $4.6 billion general fund deficit in three roughly equal pieces: $1.7 billion in cost shifts, $1.6 billion in spending cuts, and $1.5 billion in tax increases.

Education spending levels are left intact in the House plan, but every other budget line takes cuts, ranging from 3.5 percent for public safety to 7.3 percent for aid to cities and counties and 7.5 percent for state government. In total dollars, health and human services stand to lose the most at $400 million (5 percent), followed by aid to cities and counties at $250 million.

Owing to the four-year balanced budget law passed earlier this session, House DFLers had to show how they would balance the 2012-13 budget as well. Unlike their colleagues in the Senate, they would not slash spending categories in the ‘12-’13 budget by the same margin as in the ‘10-’11 budget. In the out-years, the big losers are once again health and human services, which would face a 9.6 percent reduction that amounts to $1.2 billion, and aid to cities and counties, which would fall by $362 million (10.1 percent). Higher education, which is held harmless in the House’s ‘10-’11 budget, would receive a 3.9 percent cut totaling $122 million in ‘12-’13.

The $1.7 billion cost shift–which is $400 million larger than the shift proposed by Pawlenty–involves the education budget, but health care is arguably the main beneficiary of the move in the ‘10-’11 biennium. It was a foregone conclusion among most observers that the House was not going to cut K-12 education, and the shift allows DFLers there to avoid deeper cuts that almost certainly would have fallen disproportionately on health care programs, which comprise the second largest budget category after schools.

Even among health care people in the House, there seems to be a collective conclusion that health-related programs go under the bus before education does. In the words of one member speaking on background, "Education needs to take some cuts. But the health care cuts have to come first because of the dramatic increase in costs. Unfortunately, health care versus education is going to be the political battle of the next five to eight years in our budgets."

Kelliher and Sertich were not specific about the kinds of tax increases their caucus would pursue in raising an additional $1.5 billion in revenue, but Kelliher did say that "the most important thing is to make the changes progressive"–which appears to augur for a solution based mainly on income taxes, which are really the only progressive tool of consequence in the state’s tax arsenal.

Kelliher seemed to throw a little cold water on the revenue-neutral tax overhaul proposal offered by her chamber’s Tax Committee chair, Rep. Ann Lenczewski (DFL-Bloomington), by pointing out that Lenczewski offered it as an individual member and not as a caucus-endorsed measure. "We’ll see another major tax proposal soon," Kelliher added, referring to a bill that Rep. Paul Marquart (DFL-Dilworth) is expected to announce shortly.

The most eye-catching tax number in the House proposal involves the ‘12-’13 biennium, when the "new resources" figure jumps from $1.5 billion to $2.9 billion. Asked whether this meant that the House DFL was committed to passing the tax/fee increases necessary to raise that future sum during this year’s session, Kelliher said, "We’re committed to showing Minnesotans what it takes to balance this budget" in structural terms for the next four years. Pressed further, she added, "That’s a discussion we have to have with the governor of the state. The law says that a balanced budget must be enacted, and that’s something we can’t do without the governor."

No Responses to “House budget targets: Spending cuts, tax increases, and the old shift play”

1. Anonymous Says:
   March 21st, 2009 at 8:47 am

   We finally have a story that gives some details of the House Democrat budget proposal. Thank you Mr Perry.